Understanding home insurance premium increases
You get your home insurance renewal and see that the premium went up. You didn’t make any claims or changes to your coverage, so how’s that? Actually, premium increases affect most home insurance policyholders. Here’s why.
Insurers must consider many factors when calculating home insurance premiums.
The most obvious are changes to your coverage, but external factors affect your home insurance premium as well. Here are a few examples.
Labour and material costs
For several years now, the cost of labour and materials has steadily risen. This, in turn, has increased the cost of home repair and reconstruction. Ultimately, this has increased home insurance premiums, whose calculation is based the cost of reconstruction.
While the pandemic has led to increased demand for construction materials, confinement has slowed production. The gap between offer and demand has since grown wider, which has forced the prices up.
More frequent and expensive water damage
People now use quality materials and keep expensive belongings (e.g., home theatres) in the basement. This means a higher appraisal for claims related to water damage.
With severe weather events increasing in frequency, so too are the number of claims and their appraisal.
Strong winds, even tornados, torrential downpours and icy rain cause power outages, water seepage and sewer backflow. When manufacturers are affected by devastating weather, the consequences (halted production, loss of merchandise, shortage of raw materials, labour shortage) directly affect the price of materials.
Your Home Insurance File
The changes you make to your home also impact your premium. Be sure to update your home insurance file with your insurer regularly.
To make sure you have adequate coverage, be sure to consider things like your home’s year of construction (or renovation). For example, an old water heater is more likely to leak. If you decide to operate a business or other professional activity in your home, be sure to declare the value of any merchandise or equipment kept on premises. This also applies to artwork, furniture and appliances because your coverage is based on the value of your belongings. Don’t forget to include major renovations, like finishing your basement, because they will increase your home’s rebuilding cost.
Finally, the claims made in the last year will also influence your premium.
In order to adequately protect their clients, insurers must consider all of the above when setting home insurance premiums. For more information about your home insurance coverage, go to the Customer Centre.